Daily Market Update

U.S. Dollar Mounts a Comeback, Others Flounder

September 02, 2020

The U.S. Dollar is stronger this morning as Euro and other major counterparts have eased off the gas and fallen by over half a percent on average across the board.

Overview

Yesterday’s comments from Fed officials and by Treasury Secretary Steven Mnuchin echoed the same sentiment: the U.S. must get a stimulus/rescue package passed for effects of loose monetary policy to take on full effect.

The primary reasons for the buck’s under-performance in July and August have been mostly due in part to the uncertainty economically, which simply could be tackled by a robust spending bill, which they achieved in Europe. Perhaps pressure from all angles will get all policymakers to cohesively move forward.

On the labor data front, ADP Employment Change this morning came in lower than expected for August, but the positive side is that July numbers were revised upward. ADP payrolls figured to grow by 1MM last month, but only came in 428K. We will get Factory Orders and Durable Goods Orders at 10AM. Overall, the buck has settled a bit will keep an eye on any news that throws help at the U.S. domestic struggles.

 

What to Watch Today…

  • No major events scheduled for today

Complete Economic Calendar can be found here.

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EUR

The Euro fell by 1.0% overnight after some unusual verbal intervention from the European Central Bank with the aim at cooling off the resurgence. After reaching its strongest level in 29 months, it seems like monetary authorities felt the need to say something.

ECB Chief Economist Philip Lane said that the exchange rate “does matter,” signaling that ECB officials want to see a cheaper currency, especially because of the lack of inflationary growth. A stronger Euro and purchasing power have kept consumer prices in check and away from the central bank’s target. We will see if the Euro can remain near its best level in 2 years, but clearly we met resistance.

 

GBP

The British Pound also took steps back from appreciation after hitting its best level of the year during yesterday’s section as a tax-plan to make up for COVID-19 losses seems to be hitting blocks. 

Also, despite comments this morning from EU Chief Brexit Negotiator Michel Barnier that he still holds hope for a trade deal, banks and others are making bets on the potential for no-deal scenario and what that could entail as the U.K. would need to recreate many trading partnerships. We are of the belief this is the start of a downturn for Sterling.

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